M/S PAXAR INDIA PVT. LTD.,,BANGALORE vs. DCIT,

It is submitted by the learned AR of the assessee that Ground No. 1 and 2 to 2.3 are not pressed and accordingly, these grounds are rejected as not pressed.

He further submitted that Transfer Pricing issue is involved in Grounds 2.4 to 8 but if the assessee succeeds on one aspect of Transfer Pricing issue then other aspects of this issue will be redundant. Regarding this one aspect he submitted that TP adjustment of Rs. 426,22,944/- has been made only in respect of payment of commission of Rs. 642,30,815/- to AEs. He submitted the commission was paid @ 10 by the assessee to AEs and as per the assessee, in the present case, CUP method is Most Appropriate Method because similar commission was paid by the AE of the assessee company in USA to unconnected parties who acted as Selling Agents @ around 8%. He submitted the copy of agreement of the assessee company with AEs and submitted that agreement of AE with un connected parties are available in the paper book and as per the same, the scope of work of the AE is much more than the scope of work as per the agreements between AE and un connected parties and therefore, no T P Adjustment is called for. He further submitted that otherwise also, the difference is within +/- 5% range and therefore, for this reason also, no adjustment is called for. In reply, learned DR of the revenue supported the orders of the authorities below. At this juncture, a query was raised by the bench from learned DR of the revenue as to how CUP method is not MAM in the present case and if that method is adopted then how any adjustment is called for. In reply, he simply supported the orders of the authorities below. He also submitted that on page 24 of his order, a finding is given by the TPO that the uncontrolled comparables cited by the assessee as noted on this page of his order are from USA i.e. from a market different from India and hence, the rate of commission paid in those cases cannot be compared in the present case.

We have considered the rival submissions. Regarding this objection of the TPO that in the case of the uncontrolled comparables cited by the assessee as noted on page 24 of the order of the TPO are from USA i.e. from a market different from India and hence, the rate of commission paid in those cases cannot be compared in the present case, we feel that this objection is not valid because the commission paid by the assessee to AEs is also for services rendered in respect of sales in USA and the scope of services rendered by the AEs is much more than the scope of services being rendered in such cases of the uncontrolled comparables cited by the assessee and hence, the rate of commission paid in those cases at around 8% and 10% in the present case is at arm’s length and no T P adjustment is called for. We hold accordingly and TP issue is decided in favour of the assessee.

Regarding Ground No. 10 in respect of tax demand computed by the A.O. on this basis that refund of Rs. 69,32,830/- was allowed to the assessee but in fact, no refund voucher was issued to the assessee, it was submitted by the learned AR of the assessee that this issue was raised by the assessee before CIT (A) as per Ground No. 6 but was not decided by CIT (A). Under these facts, we restore this matter to CIT (A) with the direction that he should decide Ground No. 6 raised by the assessee before him.

In the result, the appeal of the assessee is allowed in the terms indicated above.